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Posted by: donmihaihai | March 9, 2018

Hong Kong Land, 12 sites and POC.

Nailed 12 sites since beginning of 2017 in China, Singapore, Thailand, Vietnam and Indonesia. Quite some activities. Not bad for the current management who sounded really confident in previous webcast.

These investments hardly change the leverage level even after full funding. Now what more to come? Hope to see more gateway investment properties and more Singapore and China type of development properties. Perhaps it will be as CEO said, core management teams for each city/ country are in place. Team or teams in China already around for 20 years.

This make sense to me. Rather than a development project here and there or buying investment properties here and there.

Look like Hong Kong Land is starting to use percentage of completion for recognition of development property revenues for certain regions which I guess is mainly due purchase contract being used in the countries. This make Hong Kong Land In line with most of the local listed developers.

I am not against this method of revenue recognition for development properties or construction/ services project. Just one comment. Nature of lumpy project doesn’t change in real life even if accounting smoothen it.

Like it when CFO said, adoption mean advancing the recognition of development properties revenues. Simple and straight to the point.

Companies using percentage of completion can be very aggressive in their recognition. Same thing being said by WB in recent interview because of GE. I bet many investor/ analyst doesn’t fully understand how to read them in the financials. It took me years with practical experiences to understand something. Perhaps I am slow.

A goof example will be TTJ and Yongnam. Both basically operate in the same value portion in the industry. TTJ reduced the % of recognition of accrued revenues due POC over the year but Yongnam maintained. The % is huge for Yongnam. There are three possible reasons. 1st is better contract terms. 2nd is less aggressive in recognition revenues. 3rd is operational catch up in TTJ but not Yongnam.

A large number of SGX listed companies use percentage of completion for recognizing revenues. Understanding it is a must.

Next, a CEO that painted a picture that the company is worth more because the company is unable to recognize revenues of sold properties due completion method reflecting badly on them and the company. The company still has to fulfill their side of the obligation to complete the property in time and within budget.